Becomes liable to third parties *IF* they knew of their involvement

When does the dissolution of a Limited Partnership occur?

Automatically happens

1. Once final General Partner leaves2. Time specified in certificate lapses3. Event specified in certificate happens4. Unanimous consent by partners5. Illegal activity

25

What is required to form a Limited Liability Partnership (LLP)?

1. Majority vote required to form LLP2. Articles of LLP filed with Secretary of State3. Governed by laws of that State4. “Limited Liability Partnership” must be in name5. No General Partners – each LLP partner has limited liability - Exception: Negligence of partner or those under partner’s supervision

26

What are the key aspects of a Limited Liability Company (LLC)?

Members can participate in management and retain limited liability

Members don’t own any interest in LLC property

Members can assign interest; but not transfer it

Members divide profits equally unless otherwise stated

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What are the key aspects of Joint Ventures (JV)?

Similar to a General Partnership; except generally; a JV is for a single business activityExample: two companies promote a concert

Ability to bind other JV partners is limited

JV partners still have a fiduciary responsibility to JV

No state filings or paperwork necessary

28

What are the key aspects of a corporation?

Shareholders have limited liability to the extent of their capital contribution

C Corporations have a perpetual life and continue even after shareholder death

Corporations are a separate legal entity from their owners and can own property; sue; be sued

Corporations must file Articles of Incorporation in state of governance

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What are some of the advantages of a corporation?

Ability to raise capital

Limited liability - unless actions occur that pierce the veil

Ease of ownership transfer

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What actions can pierce the veil of a corporation?

Commingling of assets

Fraud

Under-capitalization

31

How is a corporation governed?

Board adopts Corporate Bylaws to govern company business

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What items are required in a corporations Articles of Incorporation?

Name; purpose; powers of Corporation

Name of registered agent & incorporators

Stock share classes authorized; par values

Name of corporate officers NOT required

33

What is the biggest disadvantage of a corporation?

Double taxation

34

How are corporations formed by promoters?

Promoter issues prospectus; arranges capital; and is a fiduciary of the corporation.

A promoter may profit from work performed if the corporation is aware of it.

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When is a corporation liable for pre-incorporation actions taken by a Promoter?

Promoter personally liable unless third party agrees to a novation and releases Promoterfrom liability; UNLESS the corporation adopts.

36

In how many states must a corporation incorporate?

Corporations are only incorporated in one state

Become a “domestic” corp. in that state

Become a “foreign” corp. in any other state they do business in

37

Describe Common Stock dividends and their rights/liabilities in relation to shareholders/corporations.

Dividends are NOT a shareholder right

Once declared; dividends become a liability to corporation

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What are key aspects related to the holding of Preferred Stock?

No voting rights

Get first rights to dividends and liquidation

Cumulative Preferred Stock dividends that go undeclared accumulate and Corporation must pay it before issuing dividends to Common Stockholders

Participating Preferred Stock gives shareholder right to dividends in addition to what they get as Preferred Stockholders

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What aspects are related to all classes of corporate stock?

Valid consideration must be given for shares

Cash; property; or prior services performed

No promises to pay or perform services

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What are the key aspects of Treasury Stock?

No Gain/Loss recognized on Treasury stock

Have no voting rights

Can be re-purchased below par

Cannot produce dividends

41

What is a stock subscription and what is required for it to be valid?

An offer to buy shares of stock

Must be accepted by corporation to be valid

Offer cannot be revoked for 6 months

Subscriber becomes liable once accepted

42

When is a corporation liable for torts by employees?

If committed within the normal scope of the employee's job

Even if they were disobeying orders

Per respondeat superior

43

What are the key aspects of a corporate officer?

Appointed by the Board of Directors

Act as Agents

Owe a fiduciary duty to the corporation

Can have legal fees paid by corporation for defense in lawsuit brought on them from carrying out their normal duties (exception- suit brought against officers by shareholders)

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What are the key aspects of a corporation's board of directors (BOD)?

Elected by shareholders

Owe fiduciary duty to corporation

Must act in good faith to avoid being liable for bad judgement

Good faith is NOT a defense for negligence

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What is Ultra Vires?

Corporation management acting beyond what the Articles of Incorporation allow

Shareholders can sue for Ultra Vires

46

When is inspecting Board minutes the right of a shareholder?

Shareholders can inspect Board minutes and records only if request is in good faith

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Who must approve mergers and consolidations?

Boards must approve

Shareholders must approve by Majority

Disapproving shareholders can get an appraisal and get their stock back at current market price